Merchants sell a great many of their notes in the open market, that is, to note brokers. The banks buy these notes from the note brokers. The assistance of the broker who handles commercial paper is a necessary and valuable aid to the purchasing bank. Fully seven-eighths of all paper purchased by New York city banks is purchased upon the simple recommendation of the note brokers. As a rule these brokers simply transfer the paper without guaranteeing, by indorsement, its payment. Notes bought by banks from note brokers without their indorsement are held to be guaranteed by them to be all right, in all points except that which covers the question of whether they will be paid or not. The bank uses its best judgment in taking the risk.

If the note dealer, in selling notes to a bank, makes what he believes to be fair and honest representations regarding any particular paper, statements of such straightforward type that upon them no charge of false pretenses can be made to rest, he simply guarantees the note geniune as to names, date, amount, etc., and that, in selling it, he conveys a good title to the paper. As business men, however, they are very cautious, and are exceedingly anxious that the paper they sell shall be paid, and as a rule they make good any losses which grow out of apparent misrepresentations on their part.